Florida flood insurance put at risk

State officials propose a fix

April 17, 2012|By William E. Gibson, Washington Bureau

WASHINGTON — – The Florida Legislature's attempt to speed building permits and kickstart construction has inadvertently put the state's homeowners in jeopardy of being booted out of the National Flood Insurance Program.

Without flood insurance, you can't get a mortgage in much of Florida. The impact on housing, construction and the state's fragile real estate market would be devastating.

But state officials have a fix in the works. They say Florida simply cannot afford to be excluded from national flood coverage.

"Florida is a low-lying peninsula with a lot of land at or below sea level. It's got to have flood insurance," said Eli Lehrer, an expert on flood insurance at The Heartland Institute, a free-market think tank in Washington and Tallahassee. "And right now, the National Flood Insurance Program is the only game in town. It's not realistic to think that Florida could withdraw from NFIP tomorrow."

The problem stems from a bill passed by the Legislature last month with little sign of controversy.

Since then, the Federal Emergency Management Agency has warned Gov. Rick Scott that the bill contains a provision that could make the state ineligible for federally subsidized national flood insurance. Scott plans to review the bill before deciding whether to sign it, a spokeswoman said this week.

The provision says that Florida communities are no longer required to get approval by any federal or state agency before issuing building permits. But FEMA says it cannot provide flood insurance to communities that do not meet certain conditions. Those include observing federal flood-plain management rules that exclude development in some flood-prone zones and require buildings to be elevated on higher ground or foundations in other risky places.

The new Florida legislation could impede enforcement of such requirements "and may jeopardize the state's voluntary participation in the NFIP," FEMA regional administrator Major P. May told Scott in a letter last month.

May noted that Florida is especially dependent on the program. "There are 459 communities participating in the NFIP in Florida," he wrote, "and there are 2,059,371 flood insurance policies in the state with just over $471 billion in flood coverage."

Anxious to resolve the matter, state officials suggested allowing communities to issue permits under the new bill but stipulating that all federal and state requirements be met before actual construction can begin. The idea is to accelerate the permitting process while still complying with federal demands.

In response, FEMA indicated that this arrangement might be acceptable as long as the stipulation is properly enforced. The agency and Scott are now reviewing the matter.

"It's a sign that FEMA will work with us on this," said William Booher, external affairs director of the Florida Division of Emergency Management.

"We are confident that any potential issues with this bill in regard to the flood insurance program will be worked out between FEMA and the state, and we would not see any disruption," he said.

The hitch underscores the importance to Florida of the controversial flood-insurance program.

"It's $18 billion in debt, with no way to pay it back," said Lehrer, one of many critics. "It encourages construction where it shouldn't happen, damages the environment and impedes the development of a private market for flood insurance."

But unless the private market presents a real alternative, he said, states like Florida will depend on the govenment subsidized program.

Congress has allowed it to lapse in recent years before renewing it long enough for members haggle over a long-term extension. It will expire on May 31 unless Congress takes action.

The House passed a bill last year to revamp the program. The Senate is considering its own version.

Each time the program nears an expiration date, Florida real estate agents fret they will not be able to process new home loans.

"If it is not renewed, there would be a lapse, which would wreak havoc with real estate closings, particularly in Florida." Lehrer said. "This has happened several times in the last five or six years. It's not an end-of-the-world situation. They (Congress) just kick the can down the road again."